BIG players in the gold mining sector have challenged government’s monopolisation of gold sales through Fidelity Printers and Refiners, saying the law scared away investors as producers are paid the bulk of their money in local currency.
Zimbabwe currently forces gold miners to sell their bullion to Fidelity. It pays them 70% in foreign currency and the remainder in local currency.
Payment delays of up to two weeks by Fidelity have impacted on producers, according to Chamber of Mines of Zimbabwe chief executive Isaac Kwesu. Gold output in the southern African nation fell 30% in the first 10 months of 2020 from a year earlier.
The law makes it difficult for miners to raise capital for investment projects, according to B2Gold Corporation and Caledonia Mining Corporation, which are considering acquiring assets in Zimbabwe.
B2Gold chief executive officer Clive Johnson said the Canadian company had held talks with the government about changing the rules to unlock investment.
While mining investment is key to rebooting Zimbabwe’s collapsing economy, the nation suffers from an acute shortage of foreign currency.
“The ability to handle gold sales is critical to a company like ours,” Johnson said. “It’s an issue that would have to be clarified first for one to buy some assets and build some gold mines.”
Existing mines require almost US$400 million in fresh capital.
To justify building new mines, Jersey-based Caledonia would need to take charge of its gold sales, said chief executive Steve Curtis, whose company is interested in buying one of Zimbabwe’s largest gold operations.
“Those are the conversations the authorities have to get their heads around if you want an industry to be invested in,” Curtis said in an interview.
“That legislation, if they get rid of it, the level of investment would no question be up,” he added.
Other setbacks affecting investors into the mining industry include power cuts, high royalties and other taxes as well as foreign currency shortages, which affect their capacity to buy new equipment and import raw materials.
During the launch of this year’s state of the mining sector survey three weeks ago, government assured miners that it was looking into these concerns.
As the bullion rally generates more interest in the industry, government is “weighing its options” on whether to grant investors gold-trading licences, said Mines deputy minister Polite Kambamura.
SOURCE – Newsday