HomeBusiness DigestCollapsing Gold Producers Seek Retention Scheme

Collapsing Gold Producers Seek Retention Scheme

GOLD producers owed over US$30 million by the Reserve Bank have proposed to government that it grant a full retention package for bullion export earnings.

Documents in possession of the businessdigest disclosed that gold miners last Friday submitted several proposals to  interim Mines minister, Sydney Sekeramayi, seeking his intervention to save the erstwhile leading foreign exchange earner from collapse.

Virtually all gold mines across the country have suspended operations owing to cash flow problems.

The miners’ proposals follow a series of attempts by the cash-strapped industry to engage authorities over the arrears by the central bank.

“It is proposed that gold producers be allowed to retain 100% of their export earnings to ensure a quick recovery of production to peak levels,” read the proposals.

Under the current payment arrangement, the central bank through its subsidiary Fidelity Printers and Refiners (FPR) pays 75% of the deliveries in hard currency with the remainder being paid in the local unit at the interbank rate.

“The gold sector has consumed capital over the years. There is need for the sector to reinvest in restoration of the production base that has been eroded,” the proposal read. “If 100% retention is not given, the gold industry will take longer to recover, as resources will be split between restoration work and growth issues.

It can be argued that with 75% retention the road to recovery will take twice as long as with 100% retention.”

Payment delays for gold delivered to Fidelity Printers and Refiners have, according to the Chamber of Mines of Zimbabwe (CMZ), led to an estimated annual production of 3,4 tonnes compared to 27 tonnes at peak in 1999.

This historic downward trend resulted in last year’s suspension of FPR from the London Bullion Market Association (LBMA).

The miners argued that gold production from the country’s top producers — Metallon, RioZim, Forbes & Thompson, Falcon, Caledonia, ZMDC, Bilboes, Freda Rebecca and John Mack, together with small-scale producers, could meet accreditation requirements to the LBMA next year if government provisionally allows the Chamber of Mines to market the precious mineral to South Africa’s Rand Refinery.

The prestigious LBMA requires producers to extract a minimum of 10 tonnes annually.

Unlike the current payment arrangements, the miners also proposed the Rand Refinery to channel payment of proceeds of the sales of gold into the offshore bank account of the Chamber of Mines, which will in turn provide a payment schedule to the bank for payment to individual gold producers.

“The agreement is to be backed by RBZ guarantees that are acceptable to potential lenders to the gold sector. The RBZ and the Chamber of Mines will set up a committee to monitor progress in the implementation of the new arrangements and to recommend further changes which will enhance gold production,” read the proposal.  

The proposed arrangement, the miners argued, would also allow them to re-start capital work and exploration that has been stopped due to viability problems.  

The lodgment of gold, the miners proposed, would continue to be through FPR who would act as an approved laboratory for assay and consolidation of bullion for export.

This means that the Chamber of Mines would contract FPR to assay and consolidate or refine before export to the Rand Refinery.

Sources said the “commendable professionalism” shown by Sekeramayi since assuming the mines portfolio ignited hope among the gold producers although he did not immediately resolve the matter.

Efforts to get comment from Sekeramayi were in vain as his mobile phone was not reachable.

Last year the beleaguered gold producers demanded that the Ministry of Finance should revoke the Reserve Bank bullion-trading licence and re-issue the permit to the CMZ after blaming the central bank for paralysing the industry.


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