Metallon Corp, the biggest gold producer in Zimbabwe, said it missed its first-half output target by 19 percent due to equipment breakdowns, in another setback for the country’s mining sector, which has been hit by slumping commodities prices.
The tax agency said on Wednesday that royalties from mining, which contributes around 17 percent of Zimbabwe’s gross domestic product, fell 65 percent in the first half of 2015 from a year earlier, and analysts say the southern African country could tip into recession later this year.
London-based Metallon, which is not listed, owns fives mines in Zimbabwe, three operational and two which are being revived, through its Metallon Gold unit.
It said on Wednesday that it had experienced equipment breakdowns at the three operational mines, and that its output for January-June totalled 48,143 ounces. That was below a target of 59,621 ounces but up from 45,524 ounces in the same period last year.
It said it would spend $20 million to get production back to normal but did not say when that would be achieved.
Zimbabwe rakes in 52 percent of its export earnings from mining, including gold.
Gold is its third-biggest export after tobacco and platinum and the country is reeling as the gold price has fallen 8 percent this year to its lowest levels in more than five years, while the price of platinum has plunged 18 percent.
Metallon said early this year that it planned to expand production to 150,000 ounces of gold in 2015, from 98,864 ounces last year, but it was unclear after Wednesday’s statement whether that target was still achievable.
Zimbabwe’s chamber of mines, which represents Zimbabwean mining companies, said on Wednesday that falling global prices of platinum and gold would hit the sector’s production and revenue.
Metallon, however, also said that it planned to re-open its Redwing mine in eastern Zimbabwe in October. The mine will add 3,400 ounces of gold by December and produce 16,000 ounces next year.
The company said it would focus on reducing its debt, currently at $20 million, and renegotiate the cost of interest payments.
“Metallon continues to engage with financial institutions for CAPEX funding and is confident that funding at significantly lower cost will be available in the next few weeks,” it said in a statement.
Zimbabwe’s tax collections were 6 percent below target in the first half of this year, the tax agency said on Wednesday, due in part of the drop in revenues from mining.