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Metallon loses US$82m, sues RBZ for US$132m for unpaid gold deliveries

By Business Reporter – Friday 17 May 2019

 

HARARE (Mining Index) – METALLON Corporation has served legal notice to the Reserve Bank of Zimbabwe (RBZ) and Fidelity Printers and Refiners Limited, (FPR) for failure to pay for gold produced, demanding full payment of amounts owed.

 

“We have started legal proceedings against the Reserve Bank of Zimbabwe, particularly against the Governor, Dr John Mangudya, demanding specific performance. We are doing this because we feel the treatment we have received from the concerned authorities has been driven by corruption and a sense of impunity, for which we believe there is no end in sight,” revealed Metallon Corporation chairman, Mzi Khumalo.

 

“Where payments were received, they would only amounted to a third of the total owed. Between 2016 and 2019, Metallon lost US$82m and Metallon is claiming for US$132m for the lack of profit and procurement, including interest,” he said.

 

The mining giant is also suing the Ministry of Mines and Mining Development for unlawful withholding of a mining lease it said was approved by the Zimbabwean Mining Affairs Board in January 2019.

 

Last year, Metallon introduced modernisation programs and mechanisation of operations for its four subsidiaries, significantly trimming down its workforce to reduce costs, increase productivity, and ensure long-term viability for the benefit of all stakeholders.

 

Khumalo said his organisation was forced to put its mines on care and maintenance because of unsustainable costs of running them without proper compensation for its proceeds from the government, resulting in 200 employees losing jobs.

 

“The disparity in the purchasing power resulted in the corporation being unable to procure machinery, equipment and operational goods at competitive prices. This seriously affected the production capacity of its various mines, leading to huge losses and unemployment measures being taken in an already strained economy.”

 

“The people who suffer most are Metallon employees who no longer have jobs. First, they were victims of hyper-inflation under the previous regime. And now they have lost their livelihoods. We had no other recourse but to take decisive action,” added Khumalo.

 

In October last 2018, RioZim threatened to take legal action against the central bank for its inability to pay for gold deliveries leading to temporary closure of its gold business units; Cam & Motor, Renco and Dalny mines; noting that since 2016 to October 2018, RioZim had only been allocated an average of circa 15 percent of the foreign currency that it has generated.

 

RioZim’s action led to the foreign currency retention review which saw large scale miners retaining 55 percent of foreign currency from mineral exports to allow them recoup production costs, up from 30 percent of their export proceeds which they were previously getting, with the balance of 45 percent retained by government.

 

One of the key issues raised by Metallon in its notice to the Governor of the RBZ and the FPR is that while the Company issued its invoices in US Dollar, the Foreign Currency Retention Scheme saw Metallon being paid in RTGS.

 

Earlier this week, RBZ introduced a gold support price of US$44 000 per kilogram and US$1 368,55 an ounce to incentivise gold miners to sell gold through formal channels after experiencing low gold deliveries to Fidelity during the first quarter of 2019. ENDS//

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