By Business Reporter – Monday 1 June May 2020
LOCAL – HARARE (Mining Index) – THE ZIMBABWE Miners Federation (ZMF) says the new gold buying framework will encourage side marketing and promote leakages as miners seek better margins from unregistered gold barons offering attractive prices.
The recent review by Fidelity Printers and Refiners (FPR) provides a flat price of US$45 per gram delivered by artisanal and small scale gold producers and a 70/30 framework for large scale gold producers.
Fidelity last week reviewed Zimbabwe’s gold trade framework which now see small-scale gold buying agents and artisanal producers receiving 100 percent of their gold deliveries in cash at a flat rate of US$45-00 per gram, and a 70/30 framework for large scale gold producers.
It is estimated Zimbabwe is losing approximately 70 tonnes of gold annually due to leakages.
According to a survey conducted, gold barons are paying up to US$50 per gram of gold.
“While the review is a welcome development, the fixed price of US$45/ gram was announced at a time the world price of gold was at around US$54.8/ gram, representing almost 80% of the world price,”
“With the world price of gold expected to continue bullish and further increase on the back of global economic risks arising from the Covid-19 pandemic which promotes the attractiveness of gold as a safe haven, the price paid to local small scale miners will continue to shrink as a percentage of the world price,”
“The unwanted consequences of the above pricing distortion are widespread side marketing and leakages as small-scale miners seek better margins from unregistered buyers offering attractive prices,” said ZMF president Henrietta Rushwaya while responding to the New Gold Trading Framework.
She said while ZMF is of the view that this review was invariably long overdue and is a relief from the 55/45 framework that prevailed prior, the sustainability of the new trading framework is questionable when the price of gold is coming down, for example, to prices lower than the US$45/ gram.
“ZMF is of the view that in that situation, it will not be practically possible for FPR to continue paying the fixed US$45/ gram (which will be technically a price support scheme) given the current liquidity constraints in the economy,” said Rushwaya.
She said ZMF believes in a gold trading framework that provides a win-win situation between FPR and the gold miner which minimises or eradicates the discrepancy between the world price of gold and local price of gold.
“This framework curtails side marketing and gold leakages while at the same time promoting delivery of gold to FPR,” said Rushwaya.
ZMF believes a ratio framework as is the case for large scale producers is recommended as it enables scientific tracking of mineral prices.
“We also propose the fair compensation of any surrendered portion in line with market developments in order to converge the world and local price of gold to minimise side marketing and gold leakages,” she said, also advocating an alternative for a full compensation of miners in US dollars in line with prevailing world gold price,”
“As ZMF we will continue to push for sectorial changes amongst them formalization, mechanisation and above all remuneration which commensurates with the global prices of the minerals produced,” said Rushwaya. ENDS// www.miningindex.co.zw
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